Career Ladders 101 (Founders Series: Part 3)

Founders: we know you’re busy. But we also know you care about corporate governance and want to stay aligned with things that impact your business’ success. We created this series to help you understand compensation fundamentals, and why they’re important.

One of the most common interview questions is, “Where do you see yourself in five years?” The way a candidate answers can give you valuable insights on their career goals and ambitions, while also helping you engage and retain them. The problem is, very few organizations actually do anything with this information once they uncover it—which is a huge mistake.

Your candidates and employees are looking for more than competitive compensation now—they want to see career progression and increased compensation in the future as well. Establishing career ladders alongside your job levels and pay bands can help candidates and employees envision their futures at your organization, so they stay.

What are career ladders?

Career ladders are a management tool to show candidates and employees how they can progress to higher levels of pay, skill, responsibility, or authority at your organization. They clearly define the job description, skills, expectations, impact, work experience, education, or other requirements needed to move up the ladder. This provides transparency so employees know how to reach their career goals, and managers know when they’ve achieved those goals.

Why career ladders matter

Career ladders help you make more consistent, fair decisions around promotions. This improves employee recruitment, engagement, and retention, while reducing bias and improving the quality of your workforce:

• Consistency: A transparent structure defines what it takes to reach each step along the career ladder. This allows managers to make more objective and consistent decisions around job offers, performance reviews, promotions, and raises.
• Recruitment: The Work Institute found that career development was the top reason for employee turnover. Candidates are looking for opportunities for growth, achievement, and security. Career ladders show them that this is a top priority for your organization as well.
• Employee engagement: Your employees will be more engaged when they’re working toward their career goals, and when their progress is recognized through promotions.
• Retention: Many people leave their companies in order to progress in their careers, but employees with career paths and development plans will be incentivized to stay.
• Reduce bias: When you make it clear what it takes to move to the next level, you create a more even playing field for all employees—not just the loudest or most visible. This makes way for people from underrepresented groups to be considered for promotions when they otherwise may have been overlooked.
• Workforce quality: Developing your employees makes for a higher quality workforce and may help you fill the skill gap so many organizations are dealing with. A more engaged, more diverse, and longer-tenured workforce can produce stronger business outcomes.

What to look for when planning, reviewing, and approving career ladders

Building career ladders generally falls to the human resources team, often in conjunction with departmental leadership. If this is a strategic initiative for your organization, here’s what you should look for when planning, reviewing, and approving your organization’s job levels:

• Defined levels: Career ladders should have three or more levels defined by criteria that can be measured. They may include: job title, job level, job description, skills, impact, work experience, and education, among other things. It should be perfectly clear what differentiates each level from the others so employees know exactly where they stand. They should also include compensation ranges, so you can be more consistent in how you compensate employees.
• Promotion speed: Determine how fast you expect employees to move from one level to the next, and make sure your salary bands support that. If you expect an entry-level candidate to gain more experience and move to the next level within a year or two, narrower salary bands can be used. Once you get into the higher career levels with fewer opportunities for promotions, use wider salary bands so you have room to reward high performers with compensation increases.
• Level of transparency: Hold a discussion with your HR and leadership team around the level of transparency you want to provide to employees. Will you tell everyone where they stand on the career ladder, and what the next level entails? Will you only share information about each employee’s next level with their manager? Will you fully disclose the entire career ladder, and corresponding pay grades, with the entire company? There’s no right answer; just make sure you come to an agreement and have a communication plan that makes sense before you roll out career ladders.
• Non-management track: Traditionally, a strong individual contributor would be expected to move into a management role as they progressed in their career. But some simply aren’t cut out for management, or they’d prefer to remain an individual contributor over becoming a manager. Career ladders should have a non-management track so these people can still see career progression and earn compensation increases as they do so.
• Measurement: It’s important to measure the success of your career ladder program. Your promotion rate is a great place to start, and you could track how the program is impacting your retention rate. Those with a focus on diversity and inclusion may also choose to measure these key metrics for underrepresented groups as well.
• Implementation plan: Ensure the career ladders are actually being used by documenting an implementation plan. Who will review the career ladders and discuss development plans with each employee? What is the timeline for completion? How often will progress be reviewed for each employee? What resources will be available for professional development: tuition reimbursement, an online learning platform, career coaching services, a formal mentoring program, or something else?
• Internal communication plan: Finally, have a plan for communicating the career ladders with employees. Share the implementation plan with managers first, so they know it’s coming and are prepared to answer employee questions. Once the dust has settled, discuss the plan with the entire company during an all-hands meeting, so everyone understands the overarching goals and next steps. This part is crucial. The way you roll out career ladders to the wider organization can make or break all your hard work.

Read more about pay transparency and best practices for company-wide roll-outs: Opening Up About Comp Isn’t Easy — Here’s How to Get More Transparent.

Final thoughts

Establishing job levels and pay bands are crucial to building a compensation strategy that can improve your recruiting and retention efforts—but they can only get you so far. Career ladders take those principles a step further to show employees what their future at your organization could look like. Rewarding employees with promotions and corresponding compensation increases will show that you value them, making it more likely that they stay long-term. Candidates today have many opportunities available to them, and you can differentiate your organization as an employer by investing your employees.

Read more in the founders series:

Pay Bands 101 (Founders Series: Part 1)

Job Levels 101 (Founders Series: Part 2)